Wall Street’s mixed feelings about real estate companies this year took a decidedly more negative turn in July.
The hypothetical Inman Index lost 5.4 percent of its value during the month, once again a poorer performance than that of the broader market indices. The Dow Jones Industrials and Standard & Poor’s 500 eked out meager gains of .3 percent and .5 percent, respectively, while the Nasdaq Composite lost .4 percent in July.
Nine of the 10 publicly traded companies in the Inman Index posted modest or major stock-market declines while only one company, Freddie Mac, posted a stock-price gain. And even Freddie Mac, which added 1.5 percent to its share price in July, has lost $8.33 per share, or more than 12 percent of its value, so far this year.
Elsewhere in the mortgage sector, shares of IndyMac, Countrywide and Washington Mutual were up 7.9 percent, 4.3 percent and .6 percent, respectively, so far this year, yet all three companies gave back some of their gains in July. IndyMac lost 8.2 percent; Countrywide lost 5.7 percent, and Washington Mutual lost 2.7 percent, all despite seemingly favorable news.
IndyMac reported a 41 percent increase in its mortgage business and a 28 percent increase in its second-quarter net income, which rose from nearly $82 million, or $1.24 per share, in the 2005 period to more than $104 million, or $1.49 per share, in the recent period. The quarterly common stock dividend was boosted from 46 cents to 48 cents.
Countrywide posted a 27 percent increase in net income from $566 million, or 92 cents per share, in the 2005 second quarter to $722 million, or $1.15 per share, in the 2006 second quarter.
Washington Mutual announced the sale of its asset management unit in a $740 million-cash transaction that is expected to close in the fourth quarter and generate a pretax gain of at least $650 million. Analysts at DA Davidson held their “neutral” rating on the company and raised their target price from $45 to $47 while an analyst at Punk Ziegel & Co. held a “market perform” rating and raised his target price from $46 to $51, according to NewRatings.com.
The hardest-hit companies in July’s Inman Index were HouseValues and ZipRealty, which watched their shares suffer one-month declines of more than 20 percent. HouseValues reported a substantial drop in net income from $3.7 million, or 14 cents per share, in the 2005 second quarter to $1.9 million, or 7 cents per share, in the 2006 second quarter. Revenue increased from $20 million in the 2005 second quarter to more than $25 million in the 2006 second quarter.
The company also announced the departure of its chief financial officer and a plan to purchase as many as 2 million of its own shares, which have lost $7.70, or nearly 60 percent of their value, this year. The stock buy-back plan reflects HouseValues’ board of directors’ “confidence in the company’s long-term strategic direction,” according to a company statement.
Wall Street also turned its thumbs down toward Cendant Corp., which has muddled through a complicated spin-off of its real estate and hospitality operations. Shares dropped 8.2 percent in July. Shares of both Cendant and Interactive Corp. are off more than 16 percent this year.
The real estate piece of Cendant, dubbed Realogy, debuted Aug. 1 as a separate issue on the New York Stock Exchange with the “H” ticker symbol. Trading opened at $25.14 per share. (Realogy will replace Cendant in the Inman Index this month.)
Move Inc., (formerly Homestore) also suffered a large stock market decline in July, when the company’s shares lost $1.05, or 19 percent of their value. The company was the subject of little news apart from a favorable July 13 story in FORTUNE magazine.
Marcie Geffner is a real estate reporter in Los Angeles.